Personal Finance News Views and Reviews for Canadians

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Tag: Mortgage Insurance

In reference to the increased debt burden of Canadian family, Canadian government has been taking various measures to stop further increase and reduce the recent debt load as it was experienced high as 152 per cent debt-to-income ratio in February, 2012. Real estate is one of the major areas where it should require a great concern of a government to take efforts to safeguard home financing and interests of home buyers / owners. The federal government is once again going to tighten mortgage-lending rules to soften down the overheated housing market and increased household debt crisis. Mr Jim Flaherty, Minister of Finance, announced new mortgage amortization and refinance rules, according to him these further adjustments to the rules for government-backed insured mortgages will bring down the overextended pressure of households and will help in making the housing market strong in Canada.

Here are the new changes which were announced by the Federal Government for insured mortgages type. These new rules will be effective from July 9th, 2012 are:

The maximum amortization is reduced from 30 years to 25 years. This amortization period reduction will help Canadian families in reducing their total interest payments towards their mortgages, which also means faster build up equity on homes and paying off mortgages. It’s the third time the Harper government has reduced the maximum amortization period in the last four years to make it easier for Canadians to buy homes.

Availability of government-backed insured mortgages to homes is limited by its price; properties purchased for over $1 million are not eligible for mortgage insurance.

Reduce the maximum loan to value ratio on refinances to 80 per cent from 85 per cent. It means now the maximum equity homeowners can take out of their existing home when refinancing is 80% of the value. It’ll promote saving via home ownership and also encourage homeowners to manage borrowings through their homes.

Maximum gross debt service ratio has been fixed at 39 per cent and total debt service ratio at 44 per cent. This will result in better protection to Canadian households in case of an increase in interest rates or sudden economic problem.

In the words of Minister Flaherty, “Our Government stands behind the efforts of hard-working Canadian families to save by investing in their homes and their future”. These adjustments will help Canadian people in realizing their goals, making it easy to purchase homes beside will help in reducing the threat of debt to personal disposable income ratios reaching up to the toxic 160 mark, the rate that caused a major downturn in economies of America and Great Britain. For more detailed information on the update, please visit www.fin.gc.ca

The Minister of Finance Jim Flaherty, on February 16th, announced new mortgage rules designed to ensure buyers can manage their debt of rising rates of interest, and to slow the speculation in real estate property.

Minister Flaherty commented on the mortgage issue:

“There is no clear evidence of a housing bubble, but we are taking proactive, prudent and cautious steps today to help prevent one. Our government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it.”

The new rules will come into force, on 19 April 2010; here is a brief overview changes apply to the government-backed insured mortgages:

Borrowers should now be available at a fixed rate of five years even if they choose a mortgage loan with a lower interest rate and the short term. Rationale for the Government for this change is that it will help borrowers to prepare for a higher rate even if it can tighten home buyers purchasing power. It remains unclear if borrowers must benefit rate posted five years or reduced the rate of five years.

The maximum amount that Canadians can withdraw in their mortgage loans refinancing will be reduced to 90 per cent of the value of their homes instead of 95 per cent. Justification of the Government for this change is that it will help to ensure that accession to the property is a more efficient way to register. The impact of this change is expected to be minimal as owners relatively little withdraw equity their houses to this extent.

A minimum down payment deposit of 20 per cent will be required for Government backed mortgage insurance on properties that are non-owner occupied “purchased for speculation,” which means rental realistic. While this measure is intended to hinder the speculative purchase of properties by reducing the buyers leverage effect, it will have an impact also on those buying real estate in general investment purposes.

Don’t forget to talk to your mortgage professional for the advice on the mortgage strategy that meets your needs and how these changes might affect you.

Your financial picture changes significantly when you get a new mortgage. The purchase of a home is a major financial commitment, and how best to safeguard your investment and your family’s interests is something you have to consider.

There are various insurance companies working in Canada that offers life, critical illness and disability protection specifically designed for mortgage borrowers. You may find the insurance company by your self or you may ask your mortgage broker. Your mortgage insurance covers great number of benefits as bellow:

Mortgage Life Protection can cover you, your partner, or up to four individuals party to the mortgage, so that in the event of a death the mortgage is paid off, along with any discharge fees. Mortgage Life coverage is not the only life insurance you will need, but it is perfectly suited to your needs as a mortgage borrower.

Mortgage Critical Illness Protection also pays off your outstanding mortgage balance in the event you are diagnosed with severe illnesses such as heart attack, stroke or life threatening situations like hepatitis and cancer. This coverage provides you and your loved ones with a LIVING benefit.

Mortgage Disability Protection makes the monthly mortgage payments up to $2,000, should you suffer an injury or accident and are prevented from performing the normal duties of your job.

Protect your investment and family’s financial future with mortgage insurance! Ask your mortgage consultant or insurance companies providing mortgage insurance any question you may have, there may some conditions apply.

According to The Department of Finance’s announcement it has been changed some of the rules for the new high-ratio mortgages in Canada, which will take effect from October 15, 2008. According to the new mortgage policy in which Government of Canada adjusted its minimum standards for the mortgage insurance guarantee framework, new mortgages with government-backed mortgage insurance policies whether issued by the Canada Mortgage and Housing Corporation or private insurers, the maximum amortization period will be 35 years, and the minimum down payment will be five per cent (borrowers may borrow their five per cent down payment, but it will not be insured).

Canadian Mortgage Rule changes highlight:

Maximum amortization period has been fixed for new government-backed insured mortgages to 35 years.

Minimum down payment of 5% is now required for new government-backed insured mortgages.

Establishing a consistent minimum credit score requirement.

Requiring the mortgage lender to make a reasonable effort to verify that the borrower can afford the his/her loan payment.

Introducing lenders about new loan documentation standards to ensure that there is evidence of property value and the borrower’s sources and level of income.

Like most of the mortgage companies have already start working their maximum amortization to 35 years for new mortgages and so do the borrower start thinking their own way, where is a possibility the mortgage application mostly effected before implication date or after? but mortgage client is out in the market due to the favorable temperature and an interest rate which is already fixed by the Bank of Canada, and who knows what it’ll be after the October 15.